Oil prices down again as dollar strengthens

AP News
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Posted: Oct 29, 2010 3:14 PM
Oil prices down again as dollar strengthens

Oil prices continued a seesaw ride on Friday, moving down as the dollar got stronger against the euro and other foreign currencies.

Crude has been stuck in a range of about $80 to $83 a barrel for the past week, as traders and investors wait for the Federal Reserve to say what it will do to stimulate the U.S. economy.

Benchmark crude for December delivery fell 75 cents to settle at $81.43 on the New York Mercantile Exchange.

Prices at the gas pump are almost unchanged again on Friday. The national average is still around $2.81 for a gallon of regular, about where it was at the start of the week. Gas is roughly two cents lower than a week ago and almost 12 cents higher than a year ago.

Significant movement in both oil and gasoline prices seems to hang on next week's Fed meeting, where the economy and what to do about it will be center-stage. Most investors are betting the Fed will buy government securities to help the sluggish economy. That could weaken the dollar and make oil more affordable to buyers with foreign currency, driving up oil prices. Oil and other commodities are priced in dollars.

Still, some analysts wonder if any Fed action is already baked into the price of oil. ""The big question is, have people already bought on the rumor?" said Michael Lynch, president of Strategic Energy and Economic Research.

No matter what the Fed does, oil and gasoline supplies remain plentiful and demand is soft. That is likely to temper price rises that could result from a weaker dollar. As retail gasoline prices edged closer to $3 a gallon or more in some parts of the country in recent weeks, drivers began to back away from the pump.

"Demand has cooled noticeably since August, with both total consumption and gasoline demand lower than a year ago, now," energy consultants Cameron Hanover said in a note to investors.

In other energy trading on the Nymex, heating oil lost 2.34 cents to settle at $2.2201 a gallon. Gasoline dropped 0.94 cent to settle at $2.1045 per gallon. Natural gas gained 14.8 cents to settle at $4.038 per 1,000 cubic feet.

In London, Brent crude fell 44 cents to settle at $83.15 a barrel on the ICE Futures exchange.